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ge 2008 annual report 81
notes to consolidated financial statements
Committed credit lines totaling $60.0 billion had been extended
to us by 65 banks at year-end 2008. Availability of these lines is
shared between GE and GECS with $12.6 billion and $60.0 billion
available to GE and GECS, respectively. The GECS lines include
$37.4 billion of revolving credit agreements under which we can
borrow funds for periods exceeding one year. Additionally,
$21.3 billion are 364-day lines that contain a term-out feature
that allows GE or GECS to extend the borrowings for one year
from the date of expiration of the lending agreement. We pay
banks for credit facilities, but amounts were insignificant in each
of the past three years.
INTEREST RATE AND CURRENCY RISK is managed through the direct
issuance of debt or use of derivatives. We take positions in view
of anticipated behavior of assets, including prepayment behavior.
We use a variety of instruments, including interest rate and cur-
rency swaps and currency forwards, to achieve our interest rate
objectives.
The following table provides additional information about
derivatives designated as hedges of borrowings in accordance
with SFAS 133, Accounting for Derivative Instruments and
Hedging Activities, as amended.
DERIVATIVE FAIR VALUES BY ACTIVITY/INSTRUMENT
December 31 (In millions) 2008 2007
Cash flow hedges $(4,529) $ 497
Fair value hedges 8,304 (75)
Total $ 3,775 $ 422
Interest rate swaps $ 3,425 $(1,559)
Currency swaps 350 1,981
Total $ 3,775 $ 422
We regularly assess the effectiveness of all hedge positions
where required using a variety of techniques, including cumula-
tive dollar offset and regression analysis, depending on which
method was selected at inception of the respective hedge.
Adjustments related to fair value hedges increased the carrying
amount of debt outstanding at December 31, 2008, by
$9,127 million. At December 31, 2008, the maximum term of
derivative instruments that hedge forecasted transactions was
27 years. See Note 29.
LONG-TERM BORROWINGS
2008
Average
December 31 (Dollars in millions) rate (a) Maturities 2008 2007
GE
Senior notes 5.11% 2013–2017 $ 8,962 $ 8,957
Industrial development/
pollution control bonds 1.10 2011–2027 264 266
Payable to banks,
principally U.S. 6.93 2010–2023 317 1,988
Other (b) 284 445
9,827 11,656
GECS
Senior notes
Unsecured (c) 4.80 2010–2055 299,186 283,097
Asset-backed (d) 5.12 2010–2035 5,002 5,528
Extendible notes ———8,500
Subordinated notes (e) 5.70 2012–2037 2,866 3,313
Subordinated debentures(f) 6.00 2066–2067 7,315 8,064
Bank deposits (g) 4.49 2010–2018 6,699 —
321,068 308,502
ELIMINATIONS (828) (1,145)
Total $330,067 $319,013
(a) Based on year-end balances and year-end local currency interest rates, including
the effects of related interest rate and currency swaps, if any, directly associated
with the original debt issuance.
(b) A variety of obligations having various interest rates and maturities, including
certain borrowings by parent operating components and affiliates.
(c) At December 31, 2008, GE Capital had issued and outstanding, $13,420 million of
senior, unsecured debt that was guaranteed by the FDIC under the Temporary
Liquidity Guarantee Program. GE Capital and GE entered into an Eligible Entity
Designation Agreement and GE Capital is subject to the terms of a Master Agreement,
each entered into with the FDIC. The terms of these agreements include, among
other things, a requirement that GE and GE Capital reimburse the FDIC for any
amounts that the FDIC pays to holders of debt that is guaranteed by the FDIC.
(d) Included $2,104 million and $3,410 million of asset-backed senior notes, issued by
consolidated, liquidating securitization entities at December 31, 2008 and 2007,
respectively. See Note 12.
(e) Included $750 million of subordinated notes guaranteed by GE at December 31,
2008 and 2007.
(f) Subordinated debentures receive rating agency equity credit and were hedged at
issuance to the U.S. dollar equivalent of $7,725 million.
(g) Entirely certificates of deposits with maturities greater than one year.
Our borrowings are addressed below from the perspectives of
liquidity, interest rate and currency risk management. Additional
information about borrowings and associated swaps can be
found in Note 29.
LIQUIDITY is affected by debt maturities and our ability to repay
or refinance such debt. Long-term debt maturities over the next
five years follow.
(In millions) 2009 2010 2011 2012 2013
GE $ 1,703 $ 44 $ 65 $ 32 $ 5,022
GECS 69,682(a) 62,894 52,835 47,573 27,426
(a) Fixed and floating rate notes of $734 million contain put options with exercise
dates in 2009, and which have final maturity beyond 2013.